RBI Repo Rate Cut in 2025: Big Relief for Home Loan Borrowers, Caution for FD Investors

In a major move aimed at boosting economic activity, the Reserve Bank of India (RBI) has announced a 50 basis points (bps) reduction in the repo rate, bringing it down to 5.5%. This marks a cumulative 100 bps cut in 2025 alone—following earlier reductions of 25 bps each in February and April. The latest rate cut offers significant benefits for home loan borrowers while signaling a potential dip in fixed deposit
(FD) returns.
How the RBI Repo Rate Cut Impacts Home Loan EMIs

The reduction in repo rate directly affects lending rates, especially floating-rate home loans, as most are now linked to the repo rate under the RBI’s external benchmarking framework. Homebuyers can expect lower EMIs and greater interest savings over the long term.

For a ₹50 lakh home loan with a 20-year tenure, monthly EMIs could reduce by approximately ₹1,960. This translates to a total saving of nearly ₹4.7 lakh over the life of the loan, according to housing experts.

For a ₹30 lakh home loan, the EMI could come down by around ₹1,176 per month. Borrowers have two options: either reduce their EMIs or keep the EMI amount the same and shorten the loan tenure, thereby saving significantly on interest payments.
Increased Home Affordability for New Buyers

With a total repo rate cut of 100 bps this year, financial planners suggest that it's an excellent opportunity for prospective homebuyers who had delayed purchases due to high interest rates.

According to experts, those taking a new ₹50 lakh home loan for a 20-year term now stand to save roughly ₹3,800 to ₹4,000 each month in EMIs, thanks to the cumulative rate cuts. This can make homeownership more affordable and accelerate real estate demand in major cities.
What This Means for Bank FD Investors

While the repo rate cut is great news for borrowers, it could have a downside for fixed income investors—especially senior citizens who rely on bank FDs for stable returns.

Financial advisors warn that banks are likely to reduce FD interest rates across all tenures in the coming weeks. Therefore, investors looking to secure higher returns are advised to lock in current FD rates now, as existing fixed deposit rates remain unchanged until maturity.

As an alternative, experts recommend considering post office small savings schemes, which often offer better interest rates and are not directly affected by changes in the repo rate.